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Markets closed the first trading session of a new week tacking toward zero in three of the four major indices; only the small-cap Russell 2000 closed near session highs. The Dow ended the day up +101 points, +0.30%, while the S&P 500 finished +0.10%. The Nasdaq closed -0.03%, now the fourth trading day in five in the red, and the Russell was up +1.02% today — this brings the small-cap index closer in line with the rest, after suffering a big slump in trading early last week.
Natural gas was a big sector winner today, +7%, and again, this is off recent lows compared to elsewhere in the energy market. Part of this was also sparked by news in the Wall Street Journal that Exxon Mobil (XOM - Free Report) may be interested in purchasing Texas-based Pioneer Natural , a Permian Basin producer of oil, natural gas and liquefied natural gas. Exxon recently posted record-high profits of $55 billion — with a “b” — in a single quarter. For more on this potential buyout, click here.
Otherwise, what we see here in a flat trading day is market participants biding their time before the next potential market catalyst. This is expected to be Wednesday’s Consumer Price Index (CPI) report, where a year-over-year Inflation Rate will give us an update on how interest rate hikes continue to affect the economy. CPI year over year has come down each successive month of the past eight months, where in June of last year we saw a 40-year high +9.1% Inflation Rate. We’ve melted down 310 basis points (bps) since then, but are still 400 bps away from optimum inflation levels, according to the Fed.
A month ago, economic reports tended to come in flat or even rising — going in the wrong direction to tame inflation — which looked for a week or so as if it might force the Fed’s hand to another 50 bps rate hike. The SVB fallout and subsequent regional bank contagion snuffed out that reality only days ahead of the last Fed meeting. But now we’ve got three weeks before the next meeting, and we’ve already seen — Friday’s jobs report notwithstanding — nearly all consequential economic prints show an economy chiseling away at its pockets of inflation.
Thus, we may be looking at a Fed rate hike ceiling at present; it takes several months sometimes for data to demonstrate the effect high rates are having. Currently, it appears as if the greatest risk of recession is coming from the prospect of the Fed continuing to raise rates too far. Perhaps the regional bank issue of last month might be enough to demonstrate that higher interest rates may, in fact, break something in the economy; our most realistic path to a “soft landing” might be for the Fed to sit on its hands for the next few meetings — should data dictate.
Image: Bigstock
Markets Flat (Russell +1%) with Econ Data Pending
Markets closed the first trading session of a new week tacking toward zero in three of the four major indices; only the small-cap Russell 2000 closed near session highs. The Dow ended the day up +101 points, +0.30%, while the S&P 500 finished +0.10%. The Nasdaq closed -0.03%, now the fourth trading day in five in the red, and the Russell was up +1.02% today — this brings the small-cap index closer in line with the rest, after suffering a big slump in trading early last week.
Natural gas was a big sector winner today, +7%, and again, this is off recent lows compared to elsewhere in the energy market. Part of this was also sparked by news in the Wall Street Journal that Exxon Mobil (XOM - Free Report) may be interested in purchasing Texas-based Pioneer Natural , a Permian Basin producer of oil, natural gas and liquefied natural gas. Exxon recently posted record-high profits of $55 billion — with a “b” — in a single quarter. For more on this potential buyout, click here.
Otherwise, what we see here in a flat trading day is market participants biding their time before the next potential market catalyst. This is expected to be Wednesday’s Consumer Price Index (CPI) report, where a year-over-year Inflation Rate will give us an update on how interest rate hikes continue to affect the economy. CPI year over year has come down each successive month of the past eight months, where in June of last year we saw a 40-year high +9.1% Inflation Rate. We’ve melted down 310 basis points (bps) since then, but are still 400 bps away from optimum inflation levels, according to the Fed.
A month ago, economic reports tended to come in flat or even rising — going in the wrong direction to tame inflation — which looked for a week or so as if it might force the Fed’s hand to another 50 bps rate hike. The SVB fallout and subsequent regional bank contagion snuffed out that reality only days ahead of the last Fed meeting. But now we’ve got three weeks before the next meeting, and we’ve already seen — Friday’s jobs report notwithstanding — nearly all consequential economic prints show an economy chiseling away at its pockets of inflation.
Thus, we may be looking at a Fed rate hike ceiling at present; it takes several months sometimes for data to demonstrate the effect high rates are having. Currently, it appears as if the greatest risk of recession is coming from the prospect of the Fed continuing to raise rates too far. Perhaps the regional bank issue of last month might be enough to demonstrate that higher interest rates may, in fact, break something in the economy; our most realistic path to a “soft landing” might be for the Fed to sit on its hands for the next few meetings — should data dictate.
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